Paper 1 · Exchange Rates and International Trade
A favourable movement in the terms of trade implies that the
Acurrency has been devalued.
Bprices of exports have increased.
Cvisible trade balance has improved.
Dbalance of payments has improved.
Explanation: Terms of trade = (index of export prices / index of import prices) x 100. A favourable (improving) movement means export prices have risen relative to import prices.
ZIMSEC Economics Paper 1, June 2009, Q22
